I am a UK-based writer and commentator with a longstanding and close interest in management. A career that dates back to the days before computers has seen me cover everything from popular music to politics with a lot else in between. But business has been my focus for more than 20 years – initially with the Financial Times and then with the Independent on Sunday, where I was part of the launch team. As well as writing extensively on management and related issues, including enterprise and innovation, for the paper and its sister publication, The Independent, I have covered these subjects for a variety of magazines. I also carry out research and analysis through the consultancy IndexB and continue to investigate business issues at the blog futureofbusinessblog.com. I have written three books, the most recent of which is ‘What you need to know about business’ (Capstone/John Wiley and Sons, 2010).

For Executives, Future Success Might Be Right Under Their Noses

Nobody would deny that recent years have provided leaders of established businesses with just about as tough a challenge as there has ever been. The sharp downturn caused by the financial crisis would have been enough on its own to stop many businesses in their tracks. But combine it with the threat posed by the technological advances associated with the internet and it is little surprise that the corporate landscape is so different now from how it was a decade ago. In short, there is so much going on that it is entirely understandable that executives do not know which way to turn.

A conventional downturn – even for managers who have grown up in booming times – is relatively easy to deal with. You cut costs, focus on core areas and look for opportunities in territories that might be expanding even as established markets slip back. But a sustained downturn that has its roots in a credit crunch is a rather different proposition. It requires much more emphasis on cash than had previously been the case in an era of cheap and abundant funds. In addition, funding issues make it more difficult to break into new markets. With confidence shattered in this way, it is easy to understand why well-known businesses have proven so vulnerable to the power of the internet. Customers – whether consumers or other businesses – will naturally be even more attracted to the promise of lower prices and easier access than would be the case in less troubled times. Established businesses have to come up with something dramatic to hang on to existing trade let alone win new business – and, when they are trying to avoid spending precious cash, the task is even more formidable.

It is clear that the solution to the problem is not to sit tight and hope that things will improve. In the modern, globalized world, there are just too many sources of competition – existing and potential – to assume that everybody will gain from the recovery now starting to gather pace in Britain, the United States and elsewhere. Business needs to stand up and start taking the risks that are supposed to be at the heart of what it does. This does not mean taking huge bets on unfamiliar markets. Instead, it means assessing and seizing opportunities as appropriate.

Booz & Company, one of the many management consultancies seeking to guide clients through this minefield, has reckoned that fewer than a fifth of companies are ready for a profitable future. Using the analogy of the gym that might be calculated to appeal to executives, it has come up with the “Fit for Growth” concept to help companies see how they can compete more effectively. The approach “builds competitive muscle while cutting down on the corporate fat that weighs a company down,” the firm explained in an article published last year.

Although it is being positioned as a way of dealing with the current situation, in reality the concept is based on what looks like sound business sense. Booz consultants have observed that companies that succeed – whatever industry they are in – share three key characteristics. “First, they create clarity and coherence in their strategy, articulating the differentiating capabilities that they will need to win in the marketplace. Second, they put in place an optimized cost structure and approach to capital allocation, with continual investment in the capabilities critical to success, while proactively cutting costs in less-critical areas to fund these investments. Third, they build supportive organizations. They redesign their structures, incentives, decision rights, skill sets, and other organizational and cultural elements to more closely align their behavior to their strategy, and to harness the collective actions of their people,” says the article.

This is all commendable stuff. But it is not clear that this will on its own ensure success in this unpredictable climate. Interestingly, another Booz consulatnt, Richard Rawlinson, has recently suggested an approach that has the potential benefits of producing growth when it is hard to come by and not costing too much. In what is essentially an enhancement of the second characteristic identified above, he urges managers to “look within” – at existing markets and customers – and to find new ways of reaching them using capabilities they already have.

“Executives should look at the products in their current portfolio with fresh eyes, and determine whether consumers are using them in unintended ways,” he writes. As an example, he cites how the consumer products group Procter & GambleProcter & Gamble discovered that its cold medicine NyQuil, which has a warning that it can cause drowsiness, was being used as a sleep aid. It responded by introducing ZzzQuil, a product with the same ingredient but a different formulation. Without a big research and development effort and using existing marketing and distribution networks, P&G was able to create a new market. Similarly, Reckitt Benckiser realised it could create versions of its Nurofen pain relief medicine to target specific problems, such as migraines, colds or muscle pain, all by using the same basic ingredient.

The message might seem obvious, but still needs stating. Leaders cannot afford to wait for the markets to pick up. They need to create their own opportunities. In some cases, they will need to be bold. But mostly they need to be alert to opportunities. And once they have spotted them they should try to match them to their existing capabilities. That way, boldness need not be equated – as it was in the wake of the financial crisis – with rashness.

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